In October 2014, an unmanned rocket lifted off from a launch pad at Wallops Island, Virginia. Seconds later, it exploded into a ball of flame and debris. When the smoke cleared and the engineers surveyed the damage, they found $16.2 million worth of damage to the launchpad: electrical systems crisped, fuel plumbing ruined, and buildings blasted by the fiery explosion.

Yesterday, the Virginia Commercial Spaceflight Authority reported that major repairs to Wallops are complete. It seemed to be happy news, as work crews fixed the site on time and within budget. Yet not all is well. Some, including the NASA inspector general, are scratching their heads about how it came to pass that NASA paid so much money to fix the facility. Read the IG's report and it seems that Virginia Congressmen backed NASA into a corner, pushing the space agency to pay millions of dollars in repairs that the agency was not liable for. NASA routed millions in extra funds to its commercial space partners in Virginia—money that came from other space operations programs.

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What happened? To unravel the particulars, rewind the calendar to 1997, when the state of Virginia entered a Space Act Agreement to use land at NASA's Wallops Island facility. The idea was, and is, a sound one: Have states run spaceports that can be rented to commercial interests, such as Orbital Sciences, the ISS supplier whose rocket blew up last year. Thus, the Mid-Atlantic Regional Spaceport was born, and Orbital (now Orbital ATK) chose the location to launch its Antares rockets, like the one that blew up in October 2014.

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But while the idea was clever, it seems the particulars of running a spaceport weren't entirely ironed out. From the start, there was confusion over who pays for catastrophic damages. The chief counsel of NASA's Goddard Spaceflight Center asked for some clarity at the time, and was told that the state agency would pay for insurance. But the insurance the state obtained seemed to have loopholes.

"We reviewed the policy in effect at the time of the Orbital mishap and found that, while it covers damage from aircraft and aviation operations, it explicitly excludes spacecraft and launch vehicles"—so says the report from the NASA inspector general. So if an airplane had crashed into the Virginia launchpad, the insurance would cover it. But if a spacecraft damaged it, no dice. Essentially, then, the NASA got insurance that satisfied the Federal Aviation Administration and satisfied the letter of the law, but made little real-world sense.

In the aftermath of the October explosion, the Virginia Commercial Spaceflight Authority desperately needed cash to get repair the pad and get back on track, so that the spaceport could continue to compete for ISS resupply missions. To be frank, there are more budding spaceports than there are missions to keep them open. Disasters and delays could deal Virginia out of the new industry.

Enter Congress. In December, it passed the Consolidated and Further Continuing Appropriations Act. In it there is one line item, written by four Virginia Congressional representatives and submitted through an appropriations committee, in which Congress directed NASA to reallocate $5 million from the agency's budget to fund repairs at Wallops.

Not too shabby on Virginia's part—your tenant breaks a launch pad, you get the feds to buy you a new one. But the VCSFA needed more, the report said, since the self-insurance they bought didn't cover the repairs. So they went to NASA to get more, saying "it had satisfied NASA insurance requirements and claimed the need to insure launch pads was not communicated by the Agency." The inspector general analyzed the back-and-forth between NASA and the Virginia spaceflight folks, and notes wryly that "it is not clear from correspondence between VCSFA and NASA that this issue was understood or agreed upon by both parties."

Eventually, NASA folded on this one and ponied up $5 million for Virginia's spaceport repairs. They were backed in a corner—pressured by Congress and eager for the administration's commercial spaceflight effort to succeed. VCSFA did not comment publicly on the IG report. In a letter of response to the IG report, NASA said that while it did not have to pay for the repairs at Wallops, the agency "made the appropriate programatic and policy-based decision" to pony up the money. The agency response then goes on to promise "NASA will continue to enforce existing requirements and procedures to ensure its commercial partners meet their responsibilities."

"On March 13, 2015, NASA issued a notice of intent to non-competitively increase the value of its existing contract with VCSFA by $5 million," the IG report says. "According to NASA officials, the funding will come from other programs within the Space Operations budget, which includes the ISS and the Space Communications and Navigation Program."

It's worth mentioning that the company renting the launch pad, Orbital, has an FAA launch license that requires the company to cover damage to federal government property. The space company paid $1 million for damages done to NASA's structures in Virginia.Asked for details, Orbital confirmed that they added launch coverage, but didn't disclose any more details because their "overall risk mitigation policy is a proprietary and competitively sensitive topic."

The debacle has changed the way the spaceport in Virginia handles insurance. When we asked the office of Virginia Gov. Terry McAuliffe, who handles insurance these days, communications director Brian Coy told us via email: "In the wake of the disaster last fall the Governor and his team renegotiated a memorandum of understanding with Orbital that requires the company to carry insurance against future events. Previous to that (and to our administration) the spaceport was self-insured, which the Governor would tell you isn't the best idea when you're launching something into space."

As the commercial spaceflight industry matures and states continue to jockey for business, more complications like this will arise. There was no demand that a commercial entity ensure its own property, and because NASA paid anyway, there is now little incentive for any other spaceport to do so if they think NASA will bail them out, too.

The Inspector General is sounding an alarm. "As NASA continues to rely on commercial companies, it is important to ensure all parties comply with procedures and clarify who pays for what in the event of a mishap."

In the case of Wallops, the taxpayer ultimately paid—at the expense of other space exportation efforts.